Frost Commentary on FCA MiFID II Guidance (cp 16-29) – Research

Strategy Level Research Budgets – Firms must document why they have grouped portfolios together to create the strategy budgets.

Asset owners must be informed of the quantum of their research budget in advance of the research services being purchased/delivered.

Asset owners must agree to research budgets.

Note: Although the MiFID II does not start until January2018, given the requirement to secure asset owner approval, firms will likely want to communicate budgets in 2H 2017 to allow time to deal with asset owner questions/objections that may arise. This suggests that the methodology for grouping strategy budgets and determining their size and client allocation would have to be in place by the end of 1H 2017.